More than half a million employees are at risk of losing their jobs as small businesses deal with heightened challenges.
According to research by Quantuma, 6,500 small and medium-sized businesses are at a higher-than-average risk of insolvency as the combined effects of rising costs, higher taxes, fallout from Brexit and staff shortages due to the pandemic take their toll.
The advisory firm expects insolvencies this year to increase by 21 per cent compared to 2021.
It predicts 19,000 businesses are likely to fail by 2024 – the highest number of corporate insolvencies in a decade.
Start-ups that are less than three years old are at particular risk, it says.
Quantuma’s research shows staff levels remain low. Small businesses employed 8.4 per cent fewer people than in February 2020, with the hospitality industry having 22.7 per cent fewer jobs than two years ago following the pandemic, while small manufacturing firms have 15.1 per cent fewer jobs available.
With inflation and the cost-of-living increase, wage bills are also increasing. Salaries increased by 4.3 per cent in February – the highest since the research had begun in 2017 – with hospitality again taking the biggest hit with a 7.7 per cent wage hike.
There was some good news in the report. Sales for small businesses had risen 8.8 per cent in February compared with the same month in 2020. Whether this will continue and be enough to offset the myriad of challenges for under-threat firms however is unlikely, it said.
Late payments getting worse
Meanwhile, small businesses are being paid later than ever, only adding to the crisis.
Analysis of half a million companies has found that invoices are taking longer to be paid. Accountancy software firm Xero found invoices were being paid on average 8.2 days after their payment terms – up 2.5 days since January and the highest level since August 2020.